Prepare for tax checks now – UPDATED

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Prepare for tax checks – UPDATE

Seven months from now Scotland & Northern Ireland joins England & Wales in having to complete a tax check when it’s time to renew your licence.

Only four months after introducing tax checks in England & Wales, HM Revenue & Customs (HMRC) are writing to as many as 4,000 private hire vehicle (PHV) drivers in a bid to claim back unpaid tax owed.

This year HMRC introduced new tax checks that must be completed when taxi and PHV drivers renew their licences in England and Wales.

The new checks, which went live on 4 April 2022, do not include any tax calculations, but simply confirm whether a driver is registered for tax on their income.  Drivers in Scotland and Northern Ireland will have to go through the same new licensing checks from April 2023.

Astonishingly, HMRC have unearthed THOUSANDS of PHV drivers who are not registered with the tax authority, but who are operating via booking apps such as Uber, Bolt and Ola.

According to the Financial Times (FT), HMRC said the lost tax originates from PHV drivers working on booking apps, and were not traditional black taxi drivers.

HMRC confirmed in a statement to the FT that the letters were “being sent to people who have earned money from driving customers who booked private hire cars through online driving applications”.

Most people are registered to pay tax, and this is about ensuring everyone pays the tax they should, thereby creating a level playing field for the compliant majority.  HMRC worked with industry bodies to make this as straightforward as possible.  The check only take a few minutes every few years and simply confirms that someone is appropriately registered for tax.

You’ll need to complete a tax check when you renew your licence as:

  • The driver of a taxi
  • The driver of a private hire vehicle
  • Window cleaner
  • Street trader
    – In fact, any self-employed person who requires a local authority licence to operate.

About the tax check

You complete this tax check on GOV.UK, through your Government Gateway account.  You will only need to answer a few questions to tell HMRC how you pay any tax due to the income you earn from your licensed trade.  If you do not already have a Government Gateway account, you can sign up on GOV.UK.

The tax check should only take a few minutes. There’s guidance on GOV.UK and anyone who needs extra support can complete the tax check by phone through HMRC’s customer helpline.

When you’ve completed the tax check, you’ll get a code. You must give this code to your licensing body.  The licensing body cannot proceed with your licence application or renewal until the tax check is completed and they have received the code.

Your licensing body will only receive confirmation from HMRC that you’ve completed the tax check; they will not have access to information about your tax affairs.

Registering for tax

Depending on your circumstances, you may have to pay tax through Pay as You Earn (PAYE), Self Assessment, and/or Corporation Tax.

If you should have been registered to pay tax and have not been, HMRC will work with you promptly and professionally to get you back on the right track.

It’s your responsibility to get your tax right, but HMRC is there to help.

If you’re self-employed: Self Assessment tax returns

If you’re self-employed, you’ll pay Income Tax and National Insurance through Self Assessment, and submit a tax return every year.

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

  • self-employed as a ‘sole trader’ and your annual gross trading income was more than £1,000
  • a partner in a business partnership

After reading this post, the most important action you can take is to prepare for tax checks – now.

See more information on how to register as Self Employed in our knowledge base.